PRINCIPLES OF TAXATION F/BUS.+INVEST.
22nd Edition
ISBN: 9781259917097
Author: Jones
Publisher: MCG
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Chapter 11, Problem 27AP
Leona, whose marginal tax rate on ordinary income is 37 percent, owns 100 percent of the stock of Henley Corporation. This year, Henley generates $1 million of taxable income.
- a. If Henley wants to pay all of its after-tax earnings to Leona as a dividend, calculate the amount of the dividend payment.
- b. Calculate Leona’s tax due on the dividend computed in part (a), and her after-tax
cash flow from the dividend receipt. - c. Compute the combined corporate and individual tax burden on Henley’s $1 million of current year income, and the effective combined tax rate on this income.
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Leona, whose marginal tax rate on ordinary income is 37 percent, owns 100 percent of the stock of Henley Corporation. This year, Henley generates $1 million of taxable income.
If Henley wants to pay all of its after-tax earnings to Leona as a dividend, calculate the amount of the dividend payment.
Calculate Leona’s tax due on the dividend computed in part a, and her after-tax cash flow from the dividend receipt.
Compute the combined corporate and individual tax burden on Henley’s $1 million of current year income, and the effective combined tax rate on this income.
Amanda would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the
entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Amanda's marginal
income tax rate is 37 percent, and her tax rate on qualified dividends and net capital gains is 20%. Assume that BAL will
distribute half of its after-tax earnings every year as a dividend if it is formed as a C corporation. Assume the income is not
eligible for the QBI deduction. Further, when computing your answers, include the self-employment tax (use a 2.9%
marginal rate for self-employment income because Amanda has salary over $147,000 from her employer) but not the
additional Medicare tax or the net investment income tax.
a. How much cash after taxes would Amanda receive from her investment in the first year if BAL is organized as an LLC? What if BAL is
organized as a C corporation?
Note: Round Intermediate calculations and your final answers to…
Amanda would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the
entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Amanda's marginal
income tax rate is 37 percent, and her tax rate on qualified dividends and net capital gains is 20%. Assume that BAL will
distribute half of its after-tax earnings every year as a dividend if it is formed as a C corporation. Assume the income is not
eligible for the QBI deduction. Further, when computing your answers, include the self-employment tax (use a 2.9%
marginal rate for self-employment income because Amanda has salary over $147,000 from her employer) but not the
additional Medicare tax or the net investment income tax.
b. What is the overall tax rate on BAL's income in the first year if BAL is organized as an LLC or as a C corporation?
Note: Round intermediate calculations to the nearest whole dollar. Round your final answers to 2 decimal…
Chapter 11 Solutions
PRINCIPLES OF TAXATION F/BUS.+INVEST.
Ch. 11 - Prob. 1QPDCh. 11 - Prob. 2QPDCh. 11 - Prob. 3QPDCh. 11 - Prob. 4QPDCh. 11 - Prob. 5QPDCh. 11 - Libretto Corporation owns a national chain of...Ch. 11 - Prob. 7QPDCh. 11 - Prob. 8QPDCh. 11 - Prob. 9QPDCh. 11 - In your own words, explain the conclusion that...
Ch. 11 - Prob. 1APCh. 11 - Prob. 2APCh. 11 - Corporation P owns 93 percent of the outstanding...Ch. 11 - This year, Napa Corporation received the following...Ch. 11 - This year, GHJ Inc. received the following...Ch. 11 - In its first year, Camco Inc. generated a 92,000...Ch. 11 - Prob. 7APCh. 11 - Prob. 8APCh. 11 - Cranberry Corporation has 3,240,000 of current...Ch. 11 - Hallick Inc. has a fiscal year ending June 30....Ch. 11 - Landover Corporation is looking for a larger...Ch. 11 - Prob. 12APCh. 11 - Prob. 13APCh. 11 - Prob. 14APCh. 11 - Prob. 15APCh. 11 - Prob. 16APCh. 11 - In each of the following cases, compute the...Ch. 11 - Prob. 18APCh. 11 - Prob. 19APCh. 11 - Jackson Corporation has accumulated minimum tax...Ch. 11 - Prob. 21APCh. 11 - Callen Inc. has accumulated minimum tax credits of...Ch. 11 - Prob. 23APCh. 11 - Prob. 24APCh. 11 - Prob. 25APCh. 11 - James, who is in the 35 percent marginal tax...Ch. 11 - Leona, whose marginal tax rate on ordinary income...Ch. 11 - Prob. 28APCh. 11 - Prob. 29APCh. 11 - Prob. 30APCh. 11 - Prob. 1IRPCh. 11 - Prob. 2IRPCh. 11 - Prob. 3IRPCh. 11 - Prob. 4IRPCh. 11 - Prob. 5IRPCh. 11 - Prob. 6IRPCh. 11 - Prob. 7IRPCh. 11 - Prob. 8IRPCh. 11 - Prob. 1RPCh. 11 - Prob. 2RPCh. 11 - Prob. 3RPCh. 11 - This year, Prewer Inc. received a 160,000 dividend...Ch. 11 - Prob. 1TPCCh. 11 - Prob. 2TPC
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